Careem: It's Full Speed Ahead For This Middle East Startup
In the spirit of full disclosure, I must admit that I walked into my interview with Careem co-founders Magnus Olsson and Mudassir Sheikha with a view to somehow rile them up- please note that this was not because I had a personal vendetta against them, but more because I wanted to see if I could get them to be anything other than the remarkably consistent media portrayal of them as being, well, just really likeable personalities. But barely a few minutes into my conversation with the two entrepreneurs, I realized that my attempts at rustling them up would be to no avail- I found Olsson and Sheikha to be, quite simply, just really nice folk, whose pervasive belief in the notion of being careem –Arabic for generous- governing how they interact with others around them, and also how they run their eponymous startup enterprise, the car-booking service, Careem.
Since its establishment in Dubai in 2012, Careem has seen its business grow at a rather rapid pace- it today has a presence in more than 20 cities spread across the Middle East, and now, Africa and Asia as well. (That pretty much explains why Careem was declared the Fastest Growing Enterprise at Entrepreneur Middle East’s 2015 Enterprise Agility Awards.) In November last year, Careem secured a Series C investment of US$60 million with The Abraaj Group as the lead investor- this third round of funding follows investments made by other entities like Al Tayyar Travel Group, STC Ventures, BECO Capital, Impulse, Lumia Capital and Wamda Capital. While getting Abraaj –which manages $9 billion in assets around the world- to back the Careem enterprise is an achievement by itself, it’s also worth noting that the investment is one of the largest ones of its kind seen in this region, with Olsson and Sheikha claiming the potential magnitude of their venture justifies the amount of funding made in the same. After all, Careem had seen month-on-month growth of over 30% in its core markets in the last three yearsand so when they began their latest funding round, the co-founders were clear on wanting a substantial investment to further scale Careem up. “If you look at our peers in other markets, they are raising hundreds and hundreds of millions of dollars,” Sheikha says. “So, at that point, we said, let’s look for an investor that has that kind of financial capability to come on board, write a big check, and also write even bigger checks in the future if required, so as to basically grow into the massive opportunity that this [enterprise] presents. And that’s where Abraaj came on the map- they are one of the few people in this region who can write these kinds of checks. And not only can they write the big checks, they are also quite connected in the region. So when we looked at our next big markets –after Saudi Arabia, we were looking at Egypt and Pakistan- and Abraaj is quite strong in both of these markets. So that reinforced the value that they would bring on board as an investor.”
For those of us watching the on-demand industry in the Middle East, the sheer size of Careem’s latest funding round (and, of course, the value that the Abraaj name by itself will bring to the brand) has caused us to take a renewed interest in the company’s rivalry with fellow car-booking service Uber, which started operations in this region in 2013. It is perhaps ironic then that Careem has often been referred to as the Uber of the Middle East, a description, which, while helpful in increasing exposure and awareness, both Sheikha and Olsson don’t seem to be entirely comfortable with. “To be honest, I feel it undermines a lot of what we are doing,” Sheikha says. “This is my personal feeling. Because if you look at how we started the business three years ago- when we started, we didn’t say, let’s see what’s happening in the rest of the world and bring it to the Middle East. Our origin was: let’s find a local problem, and solve that local problem. That’s where we started. Since we were consultants [with McKinsey at that point of time], we were constantly traveling, [and] the problem [we settled on fixing] was transportation.”
Sheikha explains how Careem started off as a corporate-focused website that would allow people to pre-book vehicles to take them to their required destinations- the company eventually moved to targeting the general public with its service, but even then, the idea was to do it in a way that made sense for this particular region. “So the whole operating model that provides this service is quite different,” Sheikha declares. “We have call centers, for example, that not only support the customer, but support the captain as well- because we believe that to offer a reliable and accessible service in these markets, you need that ability. We realized that maps in this region are not accurate- so we actually built our own maps. We spent a tremendous amount of time in training and coaching these captains, who may not be as sophisticated as they might be in other markets- people take them for granted. So when people say Careem is the Uber of the Middle East, it doesn’t recognize how we started and the whole mindset that we have of solving local problems- it sounds like we’re copying something, which is not really what we have done, and which is not the way that we operate internally. Because if we copy someone, then we don’t think we’ll succeed- we won’t win. You cannot do something better than someone else who came up with this thing, right. So we believe that the reason we have done so well is because we have always focused on solving local problems, and the way we will win in the future is again [by] focusing on solving local problems, as opposed to trying to see what others are doing and copy them for these markets.”
Careem’s origin story began when both Olsson and Sheikha had reached a point in both their lives and careers where they felt the so-called entrepreneurial itch- while Olsson had, at the time, just gone through surgery to fix a brain aneurysm and was then looking to “find his purpose in life,” Sheikha was wanting to move away from his career as a consultant and do something different and more “meaningful” instead. The two then banded together and decided to focus on building something that would solve an actual local problem. As consultants who traveled a lot in this region, Olsson and Sheikha had seen, firsthand, the difficulties of getting around in the cities they were posted in –problems ranged from unreliable service times to chauffeurs (or as Careem calls them, captains) who simply didn’t know where to go- and after quite some review and consideration of other potential business opportunities, the two entrepreneurs zeroed in on this particular issue and how it could be fixed. It’s interesting to note that the two co-founders claim to have not been focusing on just the business potential when they thought of Careem- they were very emphatic on wanting to create a bigger impact with whatever it is that they developed for the region.
“We wanted to build an institution,” Olsson remembers. “We wanted to build something that can be big, and something that can be meaningful. Let’s create meaning in how we do things. So that’s why we said: we wanted to be careem to our customers, we wanted to be careem to our captains, and we wanted to be careem to our colleagues. In short, on the customer side, we wanted to build an organization that can deliver really, really awesome products and services. Because we feel there’s not a lot of such place here, we wanted to set the bar really high, and deliver excellence.” According to Olsson, this mission statement basically drives all of what Careem has done, and continues to do, in the Middle East. For instance, with respect to customers, Careem has built a sturdy app that is easy and convenient to work with- the technology aspect of it is quite stellar. Careem has also placed a lot of importance on providing excellent customer service- Olsson says he wanted to blow people’s minds with what the company offered in this respect. “Customer service in this region is somewhere between terrible and non-existing,” he says. “It’s because people are not empowered, not trained- it’s not their fault; it is what it is. And so we said, we want to set a completely new bar.”
Careem’s captains are another factor in how it has managed to stand out as a startup enterprise- the company has invested a lot in training and educating all of the captains with them, and the results are there for everyone to see. Sheikha says that given the unfortunate way this workforce has often been treated (and regarded) in this region so far, Careem made it a priority to impact their lives in a better manner- and this made sound business sense as well. “It is a deeply held passion to help improve their lives; it’s what makes it meaningful for us,” Sheikha explains. “And at the same time, a happy captain makes a happy customer. So the thing is it’s very good for business as well. These people are, by the way, the single most important factor in the quality of service you get: the app would be super amazing, and the cars will be very, very nice as well, but if the captain does not give good service, doesn’t treat you well, doesn’t open the door for you, does not make you comfortable in the car, then everything else is immaterial. And if he’s not happy, then he cannot deliver amazing service. So we recognize it is business critical as well to make sure that we look after them and keep them happy, for them to deliver the kind of service that we want delivered to our customers.”
As for being careem to their colleagues at Careem, Olsson and Sheikha say they wanted whoever worked at the company to feel empowered, and not see their work there as being just a job. “At the end of the day, we need our people to be part of our success,” Olsson explains. “So, at Careem, from day one, everyone at Careem has stock options- from the most senior team to the most junior person, everyone has stock options. It is our way to kind of actually say everyone here is an owner. It is one of our core values as well. So that’s what we are trying to do. This is the mission of Careem: it has always been there with us, to do something meaningful and big. Recently, we rearticulated our mission, and it is to simplify and improve the lives of people, and to build an awesome organization that inspires. If we can inspire our customers, our captains, our colleagues, but also outside in our ecosystem –that’s what we are quite excited about, getting involved in the broader ecosystem as well- if Careem can be something that inspires someone to go out and do something cool, that’s awesome.”
As Olsson and Sheikha told me about all of the principles and goals of Careem, I couldn’t help but wonder about the materialistic part of it all: shouldn’t making money have been a priority too when laying out the company’s ambitions? “There is a fundamental belief [we have] that if we do the right thing, then money is a byproduct,” Sheikha replies. “The focus is not on money- the focus is on impacting the lives of people, and building an awesome organization that inspires. And if we get there, other things will follow- shareholders will make money, people here will make money- we’ll be fine. But let’s not focus on money. It’s the wrong focus- it makes you do things that are short-term, it makes you do things that are not right. The focus has to be on doing the right thing, and taking a look at the long-term success of this venture.” Olsson also points toward the nature of the industry they work in: “If you just look at the economics of the business, it is a low-margin business. So, essentially, you need to have quite a lot of scale for you to break even. And that scale will not happen overnight, but you need to get there fast. And so that’s why we are completely crazy, gung-ho about growing. So that at some point we reach a scale where we can fund ourselves- this will be great. But until we get there, we’ll need help from external investors, which means that you need to be both mindful of your spending, and you need the support from investors. So you need to keep them excited. So, of course, we care about the path to becoming self-sustainable, where we can generate our own means to go where we want to go. Once we get there, this will bring money for the employees, for the investors, for everyone- but it’s in that kind of perspective.” So when do the co-founders think Careem will break-even? “The business plan always had a multi-year journey to breaking even,” Sheikha says. “In the current [scenario], we’ll probably need funding for another couple of years before the business breaks even. So it’s still in that journey to build scale until this breaks even. So yeah, a couple more years is what we expect.”
To give the enterprise its due, Careem certainly does not seem to be taking things slow in its roadmap to breaking even. Sheikha and Olsson reveal that further expansion is on the cards- this includes increasing their presence in markets Careem is already in (cities like Dubai, Jeddah, Riyadh and Cairo), and also introducing its service to smaller cities in these countries as well. “We are realizing there’s an opportunity in the second-tier cities,” Sheikha explains. “For example, recently we opened in Mecca, Medina, Jubail; these are the next tier cities in Saudi Arabia. Similarly, there are some big cities that are still missing or quite small in our roadmap- so, for instance, we are making a big push in Pakistan; Karachi, Lahore are on the roadmap. We just launched in Lahore; we’re in the process of launching in Karachi in a big way now.” Also on Careem’s agenda is to broaden its offerings in terms of its services. “There’s an opportunity to do more things with this platform- that is, we are currently moving people; we can start moving things as well,” he says. “And while that is not a big priority at this time, we recognize that we need to start learning about those opportunities as well. So there’s a product development expansion, coming up with new products and services that leverage the infrastructure that’s already been built.” Careem has begun work on this front already- its potential in logistics was on show when it delivered Christmas trees around Dubai during the holiday season last year, and plans are afoot on utilizing Careem’s fleet of vehicles and captains to collect cash payments from customers of e-commerce enterprises in the region. The road ahead for Careem thus looks to be one filled with a lot of promise and opportunity- and with the likes of Sheikha and Olsson at its helm, this enterprise seems to be set for a smooth ride ahead.
By the numbers: the Careem timeline
July 2012 Careem is launched by co-founders Mudassir Sheikha and Magnus Olsson
September 2013 Careem secures funding of $1.7 million in a round led by STC Ventures
December 2014 Careem secures funding of $10 million in a round led by Al Tayyar Travel Group and STC Ventures
January 2015 Careem acquires Saudi Arabia-based home delivery service Enwani; its CEO Abdullah Elyas joins Careem as co-founder
November 2015 Careen secures funding of $60 million in a round led by The Abraaj Group